KRKS FM Denver- Interview Part I- John F. Haettich 4/30/2011

Quotes

"QE2 will come to an end in June, and when it does, the stock market will take a dive- forcing the Federal Reserve to either initiate a QE3, or raise interest rates to attract new buyers to treasuries. Either way, we are looking at higher unemployment in the second half of 2011 on into 2012." John F. Haettich- 4/30/2011

MICHELE BACHMANN VOTING RECORD-
Adding Up The Facts finds fault in Bachmann’s voting yes for $192 billion in additional stimulus, and while Bachmann’s views more align with those of Ron Paul, her record is short in comparison, having been a representative since 2007.

MITT ROMNEY VOTING RECORD-
Adding Up The Facts finds fault in Mitt Romney’s creation of RomneyCare for the state of Massachusetts. Mitt Romney also has demonstrated a lack of complete understanding on the economy.

RICK PERRY VOTING RECORD-
Adding Up the Facts finds fault in Rick Perry’s support for continued wars, the drug war, and his demonstrated limited understanding of the economy.

JIM ROGERS BLOG-
Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200%

MARC FABER BLOG-
Dr. Marc Faber author of the Gloom, Boom and Doom report is a world class Investor, Doctor Faber ‘s typically controversial and contrarian views have earned him the label of Dr. Doom. Doctor Doom also trades currencies and commodity futures like Gold Na

NOURIEL ROUBINI BLOG-
Nouriel Roubini nicknamed Dr. Doom and lately Dr. Realist by CNBC , is a professor of economics at the Stern School of Business, New York University and chairman of RGE Roubini Global Economics, an economic consultancy firm . Prof. Nouriel Roubini A world

PETER SCHIFF & SCHIFF RADIO-
Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.

REAL TIME FEDERAL BALANCE SHEET- US Debt Clock-
U.S. Debt Clock is a constantly updated Federal Balance Sheet, allowing you to get an idea of what our fiscal situation is, and it also allows you to compare our fiscal fitness with that of the world.

RON PAUL 2012-
It is my belief that of all of the Republican candidates, Ron Paul is the only one that fully understands our economic situation and how to fix it. He has a 30 year track record of standing for the same things, and voting accordingly. Vote for Ron Paul

Standard & Poors’ downgrading of U.S. debt on August 5 merely confirmed what any observer of Washington has known for a long time: the U.S. government has no credible plan to tackle the unsustainable deficits forecasted for 2015 and beyond. The new information this summer is that a partisan, gridlocked U.S. political system has injected a new level of uncertainty into markets.

A year ago I asked the question, “How dangeris is U.S. government debt?” At that time, the worry was that medium-term debt dynamics were so adverse that U.S. debt would become unsustainable and that investors would fund U.S. government borrowing only at sharply higher interest rates.

After nine years of declining revenues and increasing expenditures, the United States had amassed $11 trillion in debt, an amount equivalent to roughly 75 percent of annual GDP. More worrying were the projections that the debt would increase sharply from that already high level. Why would the debt increase so much? There has been, for roughly the past decade, a simple imbalance between revenue (not enough) and expenditure (too much). And an important part of the future increases in expenditure are hard-wired through entitlement spending, especially the unfunded liabilities related to healthcare and an aging society.

In 2010, the specter of wholesale selling of U.S. Treasury debt was alleviated by the eurozone debt crisis. Large investors were signaling their distaste for U.S. bonds, but they had nowhere else to turn. Had there been a reasonable alternative, one would have expected sustained selling of U.S. bonds by both domestic and foreign investors, which would leave the United States–and not just the government–with sharply higher borrowing costs.

Fast forward to this year. Washington’s recent political clash over the debt and (future) deficits problem ended with a deal that decreases budget deficits by an estimated $2.1 trillion over the next ten years. Yet this is unlikely to improve the sustainability of U.S. debt. A fundamental driver of expected increases in expenditure–Medicare and Medicaid spending–was left largely unaddressed. Another cause of the imbalance Washington has had during the past decade–revenue that is far too low–was not addressed at all.

In its failure to address the sustainability of U.S. debt the government has taken a hit. Among the recent troubling signals:

-Washington can concoct a crisis about something as mundane as the debt limit.

-Washington is willing to raise doubts about its willingness to pay bills on past spending and borrowing–spending and borrowing that Congress itself approved.

-The U.S. government is willing to expend enormous effort on all this–at a time of great uncertainty about the economy–and at the same time fail to curb the fundamental drivers of the expected growth in U.S. debt.

Washington gets away with this behavior only because the U.S. Treasury bond market is still the world’s pre-eminent market. But the U.S. Treasury market, while still large, homogenous, and liquid–features attractive to investors needing to place a large amount of funds–now has an element of uncertainty. This uncertainty, obvious before Standard & Poors’ announcement, has been broadcast loud and clear through the downgrade.

Investors domestically and abroad now wish the world had another “risk-free” asset, one that would reduce investors’ reliance on U.S. Treasury bonds.

Investors domestically and abroad now wish the world had another “risk-free” asset, one that would reduce investors’ reliance on U.S. Treasury bonds. And the antics of Washington may well prompt other countries to develop just that market. Early in the twentieth century, England’s pound sterling lost its dominance in global financial markets in part because of the government’s own doing: Massive wartime debts and a wildly volatile currency prompted the search for alternatives. But part of the pound’s decline was brought about because other countries saw an opportunity; the U.S. Federal Reserve, in particular, moved to increase the importance of the dollar in the market in trade acceptances.

Today, it would take a multi-step process for the dollar to lose its role as the global reserve currency; it could well be that this summer we have witnessed a few steps in that process. A government that puts the world’s risk-free asset at risk to attain, in the end, next to nothing, is not one that inspires confidence. And this loss of confidence will provide incentives to investors to search elsewhere for stores of value and to other borrowers to create them.

The problem with U.S. debt is in the medium term–2015 and beyond–it will be driven by unfunded liabilities that will keep increasing and revenues that will remain insufficient. Washington, by avoiding all of the tough issues, has done nothing to shore up the medium-term prospects for U.S. debt.

A year ago, at least we could say that in the midst of the global financial crisis the U.S. government had acted to avoid a depression. Today all we can say is that the U.S. government can come to an agreement that fails to address the fundamental factors that will lead to a real debt crisis. The difficult discussions about what exactly the U.S. government should fund and how exactly it should raise revenue to match those expenditures will have to wait for another day.

In the meantime, we all can hope that investors here and abroad do not become so worried about the U.S. government’s ability to deal with the looming debt crisis that they move out of the Treasury market, sending borrowing costs sharply higher, further wobbling an already weak economy. The dollar would weaken, which might be the only stimulus package Washington can hope for, but one whose impact would be vastly overpowered by the concomitant increase in borrowing costs.

Better would be a strategy to squash the looming debt crisis. Tax and spending policies must be changed so that the budget will be balanced or in surplus in good times, allowing for small deficits in times of slack economic growth. But first lawmakers need to embark on a transparent process to correct the fundamental imbalance in tax and spending. The specific proposals, which could include everything from instituting a Value Added Tax to eliminating mortgage interest deductions on the revenue side, to dramatic reforms to healthcare programs on the spending side, can come out of a conversation that policymakers have with the American public.

The U.S. government should not, as it did this summer, start with an outcome (the amount of debt) and back into temporary solutions. Rather, it must start with tough choices on fundamental drivers of the problem (imbalances in tax and spending policies) to get to an acceptable outcome. Its creditors await action.

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According to Zero Hedge, countries outside of the U.S. dumped 74 billion dollars in U.S. Treasuries, most of it over the weekend:

“Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: “the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.” In hindsight the Occam’s Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know – in the week ended October 12, a further $17.7 billion was “removed” from the Fed’s custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. (Source)

Undoubtedly, the Chinese and other countries have recently discovered that Italy and Greece, with smaller debt to income ratios than the United States, are less riskier and carry a higher rate of return. This is because, unlike the US, the Rothschild/Rockefeller bond rating agencies have trashed their country’s debt ratings, forcing them to pay a much higher interest rate than U.S. Treasuries. Hey, if you take the risk, you might as well earn the reward!